Facing the true north. My long path to becoming a venture capitalist in Africa

“A bit of advice given to a young Native American at the time of his initiation: As you go the way of life, you will see a great chasm. Jump. It is not as wide as you think.” — Joseph Campbell

On 30th November 2018, I accepted an offer to join Novastar Ventures as an Associate Investment Director.

I’ve always wanted to be an investor in an institutional VC firm with significant capital to back entrepreneurs that are building the African future. Novastar gives me the opportunity to do this.

Novastar Ventures invests in transformational early-stage businesses that enable market access and provide economic opportunities for low-income, mass market populations in Africa. Novastar recently raised $72.5 million as the first close for its second fund, targeting $120 million in total commitments. Novastar’s first fund, that was closed in 2014, was $80 million plus a $10 million co-investment facility that has backed 15 companies in East Africa. This new fund enables Novastar to continue its work in East Africa, and expand its reach to West Africa.

This is really exciting for me.

As they say, there is no straight path into venture capital. It took me a long time to get here, but every step of the way was worth it. This is part of my story. It’s a bit long.

Accidental entrepreneur

I started my journey into ventures as an accidental entrepreneur. After my PhD studies in Bristol, I was treading the normal line of becoming an academic with a decent life in Southwest England. I published 3 peer-reviewed academic journals. I enjoyed giving lectures. My wife and I bought a home in the Bristol suburbs.

But I was restless.

And at the peak of the global recession in 2009, it was difficult for me to get a long-term academic tenure or consultancy job that paid enough. Then a lot of things conspired to lead me down the entrepreneurial path.

In 2012, I started meals.co.uk, an online food delivery platform that allowed users to order food from top quality restaurants for delivery within 40 minutes. Through our platform, food was delivered by freelance delivery drivers who received order requests via a mobile app.

This was my first attempt at running a high growth startup. Before then I had no clue on what it meant to be a start-up founder or raise venture capital for a business. I had to learn a lot on my feet. We raised seed investment to scalethe business across a few cities in the UK.

I spent most of the summer of 2014 travelling across the UK to meet with a lot of VCs who showed interest in our business. It was the height of on-demand, and a lot of the market was driven by FOMO. Everyone was building Uber for X, and we seemed to be doing something with a lot of potentials.

And then we ran into a wall.

My first lesson in business was a brutal one. It’s not enough to have a great business; you must be better than your competition in generating cash from customers, investors or both. Cash is the only air you’ll breathe.

Our chief competitor understood and played this game better than us. Deliveroo not only raised series A before we did, but they raised it from Index Ventures, a top VC firm with deeper pockets than most other VCs. It made it difficult for other investors to commit capital to my business.

I can still feel the taste of the disappointment I felt when I got the phone call from the partner of a firm that wanted to lead our Series A round. I later came to fully appreciate what he said, but it was shattering at the time: “Dotun, you’ve built a great business in an interesting space. We really want to invest but we can’t compete with Index Ventures on this. They have more cash to invest than us. And we strongly believe the winner in this space will be the company that can raise the most cash.”

He was right.

Deliveroo went on to raise several rounds after that, with Index participating in quite a few of them. As at now, they’ve raised more than $800m, and will still need to raise more to be profitable as a business.

Then I understood the importance of having multi-round investors on your side.

But rather than failing outright, I secured a strategic partnership with Just-Eat UK to build their on-demand restaurant delivery operations for top quality restaurants. It enabled me to exit the business without losing my shirt.

Bitten by the bug

That experience left me with few choices. Pack up my entrepreneur kit and go back to my research papers, or get a proper job somewhere else, or use what I’d learned to fight again.

Then I had a chat with Doug Scott.

Doug had been one of the most significant figures in my entrepreneurial journey. He was the first angel investor in meals.co.uk outside family and friends. He led and shaped all my investment rounds and made them less painful. He introduced me to more than 90% of the investors I met with.

He is the person I shared all my crazy ideas with because he is crazy enough to understand them.

Doug called me when it became clear that I needed to leave the business to do something else. At that time, he was building Potential VC as an angel investment syndicate. It was his attempt at formalising his persistent habit of investing in interesting startups and founders. He wanted to know what I really wanted to do. He made it clear that he was happy to support me again if I wanted to start another business. But I was tired. I wanted to go home and cry for missing out in a life-changing startup opportunity.

Then Doug suggested Africa.

‘Why not join my investment firm with the responsibility for investing in interesting opportunities in Africa?’

That sounded interesting to me.

I joined Potential VC as a Venture Partner. Though born and raised in Lagos, I only worked briefly in Nigeria after my undergraduate studies. And I had no experience of investing in startups.

But like everything else I’ve done, I jumped right into the deep-end, scared and excited.

I spent a lot of time on LinkedIn and tech blogs to understand the key players in the ecosystem. I sent cold emails for meetings and then travelled to Lagos to meet up with as many people as I could.

I learnt a lot and forged long-term friendships. I wrote about my experience here.

And then Potential VC changed its strategy. It was obvious that we could not invest in African startups the way we were structured. The firm decided to pull out of Africa.

But by then, I was already bitten by the African bug.

I believed the African growth story and the potentials it presented. I was convinced that this was going to define my life’s work and career.

I had come to believe that innovative, tech-enabled business models would enable African entrepreneurs to build large businesses to serve the needs of these rapidly growing markets, and my role was to support them to do this.

Beyond the ‘Africa Rising’ hype, I believed that infrastructural gaps and inefficiencies in Africa create a big opportunity for high-growth entrepreneurs and outsized returns for venture investors.

This was more than a business opportunity. It was a calling I wanted to follow.

So I founded Starta.

Starta was an experiment. The idea was to build a strong community and engaging content for high growth entrepreneurs in Africa. I was particularly inspired by Wil Schroter and the team behind Startups.co, and I was convinced a similar platform was necessary to support African entrepreneurs.

I launched Starta, intending to work on it for 6 months or until I run out of money or couldn’t validate my idea, whichever came first. I felt the view would be better if I travelled closer to the precipice. Within a few months of working on it, Doug showed up again. His company provided the structure and finance that extended my runway to experiment.

I enjoyed working at Starta and building a community of entrepreneurs. It enabled me to learn a lot about the African tech ecosystem, and I worked with a great team who believed in me and what we could achieve together. We ran entrepreneurship programmes, produced content, provided growth advisory services and hosted startup events. I was privileged to have talented individuals who joined Starta at different stages of its growth, particularly Oyin Sadiq, Keturah Ovio and Yele Bademosi who went on to start his own small VC firm, Microtraction.

My second lesson was both subtle and strong. It is important to have a conviction. In venture, having a conviction about a product, market or sector is more important than the strategy you employ. And definitely more important than the desire to get rich.

There are easier ways to make money than founding or funding a startup. Conviction is the intractable sense of mission that pushes one to attempt the impossible, and to keep going when the going gets tough. It enables you to gather committed people who believe what you believe, and want to go where you are going.

Go big or go home

Starta gave me a platform and access. It allowed me to invest a small amount in two startups as an angel investor. But I realised to be truly catalytic I needed the ability to provide enough capital that will propel the winners to reach escape velocity.

I knew I could and should be doing more than this.

So in summer 2017, I had a mentoring session with Doug. We spent some time talking about my real motivations, values and long-term goals. We concluded that the only feasible way for me to reach my goals in Africa is either to join an institutional VC firm or raise a fund. Both options are not easy.

By this time, I already know my career path has always been an improvisational zigzag through disparate worlds. And most of the big leaps I make are scary as well as exciting.

Going into venture investing is like that.

Despite my startup entrepreneurial background and a stint of working at an investment syndicate fund, I was acutely aware of my lack of PE/VC fund experience.

Then I had a drink with Kola Aina in Bristol.

Kola Aina founded Ventures Platform. I first met him in 2016 when Starta hosted a networking event with Ventures Platform in Abuja. And then he spoke at a conference I hosted in Lagos.

We both realised we had similar values that are significantly driven by our Christian faith. We also had comparable visions and expectations about tech entrepreneurship in Africa. However, Kola had done more than most people I knew in the ecosystem. He had personally invested a significant amount of cash into more than 20 startups within a few years. He had also built one of the most active early-stage startup accelerator programmes.

And he wanted to do much more.

So we explored various ways of working together, especially with regards to moving Ventures Platform from a batch-based accelerator model closer to a VC. It was an opportunity to ideate and work closely with Kola and his team.

Working with Kola was the highlight of 2018. He quickly became both a friend and partner in the journey. It was a journey, literally. We had meetings in Cape Town, London, New York, Atlanta, San Francisco, Los Angeles, Paris and of course Lagos and Abuja — learning and building bridges. We evaluated our core thesis, we explored and vigorously debated ideas, and we met with lots of experienced investors who shaped our thinking, including Ben Horowitz of Andreessen Horowitz.

During this time, Ventures Platform shifted from a cohort-based programme that writes a $20,000 cheque per company, to investing $100,000 and more in a single deal. The firm baked its core investment thesis and solidified its position as a major early-stage investment option for Nigerian entrepreneurs. It was a privilege to have a behind-the-curtain view of this transition, and play a part in the debate and processes that made it happen.

And Kola is not yet done. He has big plans that I am excited to see what happens. Working with him further strengthened my own thesis and conviction around investing in African entrepreneurs. I’m convinced that entrepreneurship — not aid or politics — is the best way to make a significant positive and scalable impact on society.

Whilst Doug helped me to see potential pathways to my goals, walking with Kola showed the plausible ways to get there.

Finding the true north

When I met Sapna Shah from Novastar Ventures at a cocktail event in Lagos, I was both intrigued and fascinated by Novastar’s thesis on the mass, low-income market.

Though I’m acutely aware of the dire need of capital and venture infrastructure for African entrepreneurs, I’ve always been dismissive and sceptical about impact investment. Especially the ones that focus on ‘doing good’ without strong expectations of commercial returns. The pseudo-grants.

Talking to Sapna, I understood Novastar’s core hypothesis is challenging the mutual exclusivity of ‘doing good’ and ‘making a profit’. Steve Beck and Andrew Carruthers started the firm with a vision to see Africa populated by a growing number of entrepreneurs building businesses for the common good. The vehicle for the vision is a commercial venture fund with the scale to back exceptional entrepreneurs designing and executing innovative business models to profitably serve Africa’s true mass (low-income) market. In so doing, Novastar rejects the zero-sum thinking that you have to choose between doing well or doing good.

Novastar’s idea is both simple and profound to me, and here is my interpretation of the thesis. Most Africans live on less than $5 per day, a lot of which goes into non-discretionary spend on health, education, food, energy and logistics. It’s prudent, therefore, to invest in high-capacity entrepreneurs that are enabling affordability, accessibility and efficiency in the low-income mass market value chain.

After meeting with Steve and Andrew, they invited me to spend a few days with the rest of the team in Nairobi. It was thorough and yet, the best interview process I’ve ever been through. I had a one-on-one conversation with every member of the team including the admin staff. We met over dinner, lunch and a walk in the 10-acre estate where their Nairobi office is located. I also had meetings with two of their portfolio companies and one of their LPs. The process enabled everyone at Novastar to evaluate me at a deeper level beyond a formal interview. And it also gave me the chance to really evaluate if the firm was the best option for me at this time.

Going to Nairobi also gave me an opportunity for mindfulness. It allowed me to evaluate my journey so far, be grateful for the opportunities, and be expectant of the next thing God has for me.

By the time I left Nairobi, I was convinced that Novastar is a clear expression of what I’ve tried to do in the past three years. And it became apparent that the next logical step in my journey would be to join them as they prove out their thesis in West Africa.

Then Steve called to offer me the role. And I said yes.

I look forward to this new phase of working as an institutional investor. Apart from enabling me to support entrepreneurs and businesses that are making an impact, it opens up possibilities of partnering with some of the brightest minds that will shape the African future. I will get to listen to founders sharing their dreams and ambitions and get the chance to finance transformative businesses that will make a huge difference in the lives of millions of Africans.

I look forward to learning from Steve, Andrew and the rest of the team at Novastar, who between them have been doing venture investment since 1996, been involved in 16 funds, started investing in Africa 10 years ago, worked in philanthropy and have consulted for the CEO’s of global Fortune 100 companies.

This means I’ll be transitioning out of Starta to focus on this. I’ll be pausing Building the Future Podcast for a few months in order to immerse myself into my new role and accelerate the initial learning curve. Investing requires a lot of learning on the job and I will be working from Nairobi in the next few months to learn with the team. And ultimately, I will be moving to Lagos to fully join the hustle with other entrepreneurs and investors in the ecosystem.

My third lesson is the most important one. Relationships trump transactions. My life has been blessed with a tapestry of people who have shaped my career and worldview. I’m grateful to these people.

This is why I prioritize long-term relationships over short-term transactions in my business dealings. My real wealth is the relationships I have.

I’m excited to begin a journey where investing in people will be the focus of my daily work.

It was Fred Wilson of Union Square Ventures that famously said it took him 10 years to become a “half-way decent” venture capitalist. I’m at the start of this journey, and sincerely pray that CAVU — ceiling and visibility unlimited — will define my path.

PS — Novastar invests in innovative businesses in East and West Africa that profitably serve aspiring mass market either as customers or source from them as suppliers. You can read more about what we look for in entrepreneurs, and reach out to explore how we can work with you.